What took so long to approve Facebook deal for Instagram?

“The Federal Trade Commission has closed its nonpublic investigation of Facebook’s proposed acquisition of Instagram, Inc., without taking any action. Accordingly, the deal may now proceed as proposed.”

So the question now is this: What took so long?

Plain and simple: This was a warning shot fired across Facebook’s bow.Anti-trust regulators wanted to put the social networking company on notice that it’s watching it carefully. And by dragging out the process much longer than anyone expected, the feds used this deal to educate themselves about Facebook’s technology, markets and finances.

There was never really a chance the FTC was going to block this deal. Instagram is still relatively small, albeit growing fast. But defining a clear market around photo sharing, especially when you mix in mobile, was always going to be a stretch. We have too many options for sharing photos for the feds to make a compelling anti-trust case.

Still, this took far longer to approve than most folks expected. That includes Facebook, which originally said the deal would close in the spring. When reviewing a big deal like this, the federal government has a set period to make what’s called a “secondary request” for more information. Facebook clearly wasn’t counting on that happening.

“Typically, whichever agency is reviewing the deal has six weeks to either approve the acquisition or make a request for more information. I still think even the latter is unlikely, and so does Facebook, which says the deal will probably close this quarter.

But it would be interesting, if these agencies wanted to fire a bit of a warning shot. The could do that by making that request to better acquaint themselves with Facebook’s business, and to put the company on notice that it’s being watched closely as it grows and becomes more dominant.”

Facebook agreed to pay Instagram $200 million if this deal didn’t close by December. So, they mercifully avoid that penalty. On the other hand, Instagram-ers have no doubt watched in dismay as the value of their deal has fallen from a nice round $1 billion to $747 million. Not the happiest way to start a new relationship.

But more importantly, Facebook will have to move carefully on larger acquisitions. Even though it has a large war chest thanks to its IPO. The government has its eye on Facebo0k’s growing power and influence.

Add that to a growing list of problems the social networking giant has to worry about.